Published on EurActiv (http://www.euractiv.com)
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CAP reform 2014-2020

Published: 26 October 2011 | Updated: 16 November 2012

The European Commission's long-awaited proposals to overhaul the Common Agricultural Policy (CAP) has come under criticism for falling short on objectives to distribute money more fairly, improve the sector's competitiveness and promote greener farming practices.

Milestones

Policy Summary

Launched in 1962, the Common Agricultural Policy is a system of EU agricultural subsidies and programmes that marks the biggest single budget outlay for the EU and costs each EU citizen around 30 cents per day.

Fifty years later, debates focused on how to reward farmers for being more productive and environmentally sustainable. If approved as proposed, the 7-year, €435.6-billion programme would account for nearly 40% of EU's spending. Of that, €317.2 billion would fund direct payments to farmers under Pillar 1 of the CAP. In the 1970s, the CAP represented nearly 70% of the community’s budget. 

The Commission’s October 2011 proposals to reward farmers to expand green space turned out to be a hotly contested issue, with farm organisations and their advocates in Parliament claiming this would create more bureaucracy. Others contend that reducing cultivatable land at a time of high food prices and rising global demand does not make sense.

About 70% of CAP spending goes to direct payments for farmers, 20% of the budget is spent on rural development measures, and the remainder is handed out as export subsidies to food companies. France, Germany, Spain, Italy and Britain are the biggest beneficiaries.

In October 2011, the European Commission proposed overhauling the CAP, suggesting to shift a greater part of the funding to the EU's newer member states from Eastern Europe.

The Commission's CAP proposals also place a greater emphasis on environmental measures, with up to 30% of the funding granted to farmers who diversify production, rotate their land or maintain permanent pastures.

The new policy directions are now being debated between the European Parliament and the EU's 27 member states in view of an expected approval by end 2013.

Issues

Budget at the heart of debate

In June 2011, the European Commission tabled a proposal for the EU's 2014-2020 budget which largely leaves current farm funding untouched, although slight cuts will be introduced gradually.

While the Commission proposal maintains CAP spending at its 2013 level, overall, farm policy should have a slightly smaller share of the total EU budget.

The Commission proposes to allocate 36.2% (€371.72 billion) of the proposed EU budget to the CAP, compared with 39.4% in the current budget. This funding will be complemented by a further €15.2 billion for research and innovation, food support for needy people, a new reserve for crises in the agricultural sector, and other projects. 

Of the €371.72 billion allocated to the CAP, €281.8 billion is earmarked for direct payments and market measures in support of farmers (Pillar 1) – down from €289 billion in the current budget. Over the years, these will gradually decrease – by €42.2 billion in 2014 and by €38 billion in 2020.

The rest of the CAP budget (€89.9 billion) is earmarked for rural development (Pillar 2) – a decrease from the current €96 billion. It is also proposed that annual Pillar 2 budget will fall in stages from €13.6 billion in 2014 to €12 billion in 2020.

The overall size of the farm budget will ultimately be decided in separate talks between EU governments on the bloc's next long-term budget for 2014-20.

Direct payments to farmers slowly shifting Eastwards

The Commission presented its legal proposal to reform the CAP post 2013 in October.

The reform proposal includes a system of "convergence" to reduce income disparities between farmers in Western and Eastern Europe.

The national envelopes for direct payments will be adjusted so that “all member states with direct payments below 90% of the EU-27 average will, over the period, close one-third of the gap between their current level and 90% of the EU average direct payments."

For those countries that currently receive more than average, the minimum contribution for balancing the level of payments between the EU-27 is 1%, “and for countries with the highest levels of payments, the maximum decrease will be around 7%," EU farm Commissioner Dacian Cioloş told EurActiv.

In order to move away from the different systems of the Single Payments Scheme in the EU-15 (which allows for historical references, or a payment per hectare, or a "hybrid" combination of the two) and the Single Area Payments Scheme (SAPS) in most of the EU-12, a new “Basic Payment Scheme” will apply after 2013.

To reduce the discrepancies between the levels of payments between farmers, between regions within member states and between member states, all the EU-27 will be obliged to move towards a uniform payment per hectare by the start of 2019.

The payments will, as at present, be subject to “cross compliance,” which requires farmers to respect certain environmental and animal welfare rules, while various simplifications are being proposed.

Co-funding between the EU and member states

The Commission is proposing to allow those member states that get less than 90% of the EU average for direct payments to channel up to 5% of their Rural Development funds to their 1st Pillar national envelope, which provides direct income support to farmers. Meanwhile, all member states could transfer up to 10% of their national allowance under Pillar 1 to their Rural Development envelope (Pillar 2).

Normally, the first pillar direct payments for income support are 100% financed by the EU while Pillar 2 is co-funded by member states and aimed at pre-defined rural development and environmental measures.

Distribution of payments to farmers

The Commission also intends to cap direct income support for the largest agricultural holdings, which it said "receive a disproportionate share of direct income support from the CAP." The idea is to progressively cap payments starting from €150,000 - with maximum amount of support for any individual farm limited to €300,000 per year. But this only after a part of the salary and social security costs have been deducted from the total.

CAP support is also proposed to be given only to active farmers, and not to those with no tangible agricultural activity. The EU executive’s definition of an active farmer is however rather broad and support would still be given to farmers whose revenue from non-agricultural activity represents 95% of their annual income.

A special Small Farmers’ Scheme is also being proposed and could represent up to 10% of the national envelope. And special support for new farmers under the age of 40 could represent up to 2% of the national envelope.

Greening

The EU executive also proposes making 30% of the CAP’s direct payments conditional on three "greening" measures:

Market management

With milk quotas and wine planting rights already set to expire, the Commission is looking to end the last remaining quota regime - for sugar. The bloc's current system limiting national sugar production and setting minimum prices should end by 30 September 2015, accompanied by reductions in import tariffs.  

The existing systems of public intervention and private storage aid – used as safety nets to help producers in times of market difficulty – will be revised “to be more responsive and more efficient.” A new safeguard clause is also to be introduced to enable the Commission to take emergency measures in response to market disturbances, such as the one caused by the e-coli crisis in May-July 2011.

In order to improve farmers' negotiating position in the food chain, the Commission is proposing to support and develop producer and inter-professional organisations, as well as direct sales between producers and consumers.

Rural development

Instead of three axes linked to economic, environmental and social issues with minimum spending requirements for each area, a new programming period is proposed following 6 priorities:

Member states are required to maintain 25% of their Rural Development envelope on issues related to land management and climate change mitigation and adaptation.

Positions

The European Commission's long-awaited proposals to overhaul the Common Agricultural Policy (CAP) have left most EU politicians and stakeholders disappointed.

French farm minister Bruno Le Maire said that France supports the principle of greening CAP subsidies, but insisted that it must be "simple", give incentives and take into account budget considerations. Greening should match the economic reality of farms and cut red tape. "For the time being, the Commission proposals do not meet these objectives," he added.

UK Environment Secretary Caroline Spelman declared herself pleased with the message that the CAP has to do more to help the environment, and that its budget cannot keep increasing in the midst of an economic crisis. "But while some of the Commission’s rhetoric is right, overall we’re disappointed and the proposals as they stand could actually take us backwards," she said.

MEP Luis Capoulas Santos (Socialist & Democrats), who will be leading the negotiation on CAP reform for the European Parliament, said that "the package needs to be greatly improved, if it is to win the support of the Parliament," as "there is too much bureaucracy, less money and not enough justice."

According to Santos, the proposed implementing measures "are so bureaucratic that they will induce many farmers to renounce EU incentives and opt-out from the greening policy we are trying to introduce in Europe." Moreover, "there will be still strong inequalities among EU countries and farmers as the money saved from capping the largest farms is not then redistributed to the smallest farms," he said.

He also criticised the Commission's proposed definition of an active farmer, saying it qualifies "Queen Elizabeth [as] a farmer".

Italian MEP Paolo De Castro (Socialist & Democrats), chair of the Parliament’s Agriculture Committee, stressed that "environmental sustainability cannot exist without having first ensured the economic sustainability of our farms and in this regard, the risks are now much more common and extensive than in the past. We are facing a reform of great importance that will take us into a new era, in which the volatility will become a systematic phenomenon and farmers will need new tools to manage a new and difficult situation."

"The EP will make full use of its co-decision prerogative," said German MEP Albert Dess (European People's Party), welcoming the proposals as a good starting point for discussion. But, referring to the proposed greening measures, he stressed that "we will under no circumstances accept more red tape."

Irish MEP Mairead McGuinness (European People's Party), said she was "concerned that the Commission in its document has warned farmers that they cannot rely on support conditions remaining unchanged because of economic development or the budgetary situation."

MEP George Lyon (UK), from the Liberal and Democrats group (ALDE), said that the greening of the direct payments as proposed by the Commission "is nothing more than green-wash and the measures run a real risk of making European farmers less competitive. To quote just one concrete example, it is complete nonsense to require 7% of each farm's land to be set aside for ecological purposes at a time of food and energy scarcity."

He however, welcome the proposals to target payments at active farmers, young farmers, green measures and farmers situated in areas under natural constraints "who most need support" as well as the proposed further alignment of the CAP with the EU's 2020 strategy under rural development, "in particular stressing research and innovation."

The Parliament’s Green group, for its part, regretted that "the proposals have been severely watered-down to meet the demands of change-resistant member states and the agro-industry lobby."

French Green MEP José Bové said that "the proposals have been stripped of all ambition and, as such, will fail to provide the basis to properly reform the CAP and ensure it is a tool to promote sustainable agriculture and fair incomes for farmers."

German Green MEP Martin Häusling regretted that proposals fall short on the "core goal of this reform" which should be "redressing the perverse system of payments to ensure it promotes a fair distribution of funds, which prioritises support for smaller farmers and local food systems, rather than benefiting large farmers and the agro-industry". He also deplored that the threshold or cap, beyond which direct payments should be 'degressive', "is set far too high, benefiting large farmers and the agro-industrial complexes".

Copa-Cogeca, the EU farmers lobby, called "for more emphasis to be put on measures which improve the profitability and productivity of the EU agriculture and agri-food sector, as well as benefiting the environment."

Copa and Cogeca Presidents together stressed that "it does not make sense to require every single farm to stop producing on a certain percentage of their land (ecological set-aside) when world food demand is set to rise by 70% by 2050 and production is threatened by more extremes of drought, flooding and storms. The Commission proposal also runs counter to the Commissions’ 2020 strategy for growth and employment".

Copa President Gerd Sonnleitner also expressed concern over further mandatory environmental constraints on farmers, which will "just add more costly burdens onto EU farmers", threatening competitivity and economic viability of farming families and agri-cooperatives. "Farmers must be able to choose the measures which are most appropriate for their farm," he said.

Cogeca President Paolo Bruni added that Copa-Cogeca is very worried about the fact that "there is not a clear definition of a producer organisation in the EU Commissions proposal. It is also paramount that EU competition rules are adjusted to help producer organisations, such as cooperatives, to grow in size and scale."

The European Coordination Via Campesina (ECVC) said that the Commission proposals will leave "markets without driver, farmers without income, payments without justice" and "defends the interests of industry, big retailers and the import-export sector".

ECVC rejects the payment per hectare and defends the payment per active person. "The payment per ha, decoupled from production, has perverse effects on the price of agricultural land and leads to income for the owners," it said.

It also believes that the ceilings proposed to level off the direct payments are too high. "The recovered amount would be very weak," – 0.2% of the total basic payment for Germany and only 1.3% for the EU-27. "The EP and the Council must lower these ceilings, to release more funds in favour of small-scale farms and the less favoured areas or sectors," it said.

The Central Union of Finnish Agricultural Producers and Forest Owners (MTK) said that the proposals do not pay enough attention to the profitability of agriculture, nor to income of farmers and that the proposal threatens the competitiveness of EU agriculture.

"The proposals’ greening objectives are in conflict with the global objectives of increasing agricultural production and the general greening rules proposed are not compatible with Finland’s special conditions. Farmers might also be confronted with more red tape," it said.

UK National Farmers' Union (NFU) and Country Land and Business Association (CLA) believe that "very few of the proposals" will help meet the stated objectives of 'smart, sustainable and inclusive growth for European agriculture' "and many of them will actually move farming in England and Wales in the opposite direction".

"We want to see a fair allocation of the budget to the UK, in both pillars, so there is no necessity subsequently to move money between the two pillars - in either direction. Specifically, we don't support the attempt to allow up to 10% modulation. We also need to see the capping proposals that would discriminate against the UK rejected. In terms of reducing complexity, we want to see greening measures which can be easily administered and monitored," they said.

CEJA, the European Council of Young Farmers, welcomes the measures for young farmers in the proposed CAP package, but "calls for the capping level for top up payments to be increased to 50 hectares. Young farmers tend to run larger farms than the average national farm size, and the threshold for the top up should reflect this."

Yara International, the world's largest producer of nitrogen-based fertilisers, "cautiously" welcomes the Commission's reform proposals. "At Yara we know that it is possible to reconcile the dual needs for greater food production and greater environmental protection. The key to succeeding on both accounts is a strong focus on  nutrient management and resource-efficency. We are pleased to see that the Commission proposes to make efficient use of resources a priority for the agri-­environmental schemes in pillar 2, and in the   further debate on this we encourage MEPs and  the Member States to look at the technical solutions  that are available for achieving cost-­effective greening with benefits for the farmer, environment and climate alike," said Willem Sloot, Head of industry relations at Yara International.

"Alongside  delivering environmental public goods, ensuring food security  must  remain   the key priority for European farmers, but mandatory setting aside land as proposed by the Commission is  however counter-productive in this regard," Sloot added. 

FoodDrinkEurope, the EU's food industry association, said it was disappointed that "the proposals do not place more emphasis on productivity". Jesús Serafín Pérez, President of FoodDrinkEurope, said: "Europe’s food and drink industry purchases and processes 70% of EU agricultural production and, as such, has an inherent interest in promoting a competitive, productive and sustainable EU agricultural sector which delivers adequate quantities of agricultural raw materials that correspond to specific quality criteria and that are competitively priced. The CAP reform should reflect this interdependence between European farmers and the food industry."

FoodDrinkEurope asks for the CAP "to more explicitly address the need to support productivity growth in both pillars, while protecting EU productive potential and safeguarding natural resources, such as soil and water. In particular, pillar one measures should contain more tangible objectives to drive concrete results."

The European Sugar Manufacturers' Association (CEFS) express strong concerns on the Commission’s proposal aiming at ending the sugar quota system in 2015. "This decision comes as a surprise as CEFS understood that the Commission initially intended to prolong the current system," it said.

"In addition, the impact assessment used by the Commission to justify the abolition the quota system in 2015 includes several inconsistencies such as the assumed increase in European production, whilst yields, beet and sugar prices are all expected to decrease. Furthermore, this static approach of the study does not take into account any volatility and its impact on the specific, long-term business model of beet sugar production," CEFS stated.

The European Sugar Users (CIUS) group, whose members include the Union of European Beverages Associations (UNESDA) and big multinationals like Danone, Coca-Cola, Unilever, Nestlé and Kellogg’s, welcomed the European Commission announcement to abolish the EU sugar quota system by 2015. "The current EU sugar regime is not delivering a sustainable sugar value chain and needs long term action. European sugar users continue to experience immediate supply difficulties which are having significant detrimental impact on their competitiveness," it said.

"Sugar is the last significant agricultural commodity which has not been opened up to market forces. The process of deregulating the EU sugar sector should begin without delay in 2015 with the abolition of production quotas, accompanied by reductions in import tariffs to a level that will stimulate competition in the market. This would help to deliver a more competitive EU sugar market while ensuring greater security of supply for sugar users," CIUS stated.

Caobisco, the Association of the Chocolate, Biscuit and Confectionery Industries of the EU welcomed the abolition of sugar quota, saying "the measure will enable European agricultural production to become more efficient and demand-driven."

But Caobisco is concerned that the Commission proposals do not adequately address the need for increased sustainable production. More emphasis is needed on research, development and innovation, in partnership with the private sector, to obtain higher yields and quality while reducing the burden on the EU’s precarious natural resources.

ePure, a trade group representing the European renewable ethanol industry, said it was "deeply concerned about the European Commission’s plans to set-aside 7% of EU agricultural land as "ecological focus areas," in effect marking the reintroduction of the EU's set-aside policy."

"This new set-aside proposal comes in addition to the continuous land idling in Europe, which already leads to a substantial loss of agricultural land in the EU. In parallel the Commission reflects on possible policy measures to hedge against potential indirect land use change (ILUC) effects of biofuels production. As the ILUC debate boils down to the availability of enough arable land to fulfill our needs now and in the future, the proposal shows a clear lack of consistency between the different EU policies," ePure regretted.

"The solution to both the ILUC debate and the quest for an environmentally more sustainable agriculture lies in the enlargement of the scope of binding sustainability criteria," it said.

The Confederation of European Forest Owners (CEPF) welcomed the proposal as a step towards supporting the sustainable development and a green economy in the EU, but regretted that it, however, is "not yet able to unleash the full potential of the forest sector for rural areas and its contribution to the EU 2020 strategy".

"Rural Development, the second pillar of the CAP, is the EU policy of crucial interest for forest owners. This is the main support for forest related activities and for a diverse group of 16 million private forest owners, who take care of approximately 60% of Europe’s forests," it said.

EuropaBio, a trade group representing EU biotech and chemical firms, welcomed the Commission’s support for science and innovation in agriculture and for "the bio-based economy set out in the new CAP proposal".

Nathalie Moll, secretary general of EuropaBio, a trade group representing biotech firms such as Monsanto and Syngenta, emphasised the economic and industrial opportunities offered by the proposed CAP reform. "The bio-based economy offers Europe the potential to accelerate its transition to a more sustainable growth model while also developing a globally competitive sector capable of generating more jobs."

As regards GMOs, it said: "Farmers must also be given the choice to use the tools they need in food production. Access to biotechnology not only helps farmers become more productive, it helps them compete globally."

The WWF European Policy Office expressed disappointment about the CAP reform proposal, saying it "risks giving €372 billion to intensive agriculture practices that will mainly benefit only bigger farms and will create damages to the environment."

Matthias Meissner, WWF leader on the CAP reform, said that "after lots of promises from the Commission to change farming practices in Europe and create a sustainable CAP, agriculture lobby groups and less progressive parts of the Commission, Parliament and Council have managed to delete all initial progress, producing a very weak proposal that continues to give money to farmers without monitoring their impact on the environment."

Friends of the Earth Europe (FoEE) said that the proposed reforms "are insufficient to protect the environment and the majority of farmers." Stanka Becheva, FoEEe food campaigner regretted that "some of the simplest of measures are missing – ensuring arable farmers rotate crops on their fields with nitrogen-rich legumes would reduce our dependency on rainforest-damaging soy animal feeds. Its omission shows the influence of agri-business, pushing intensively-farmed monocultures at the expense of fairer and greener farming."

Other weakness identified by FoEE include the maintenance of "export subsidies and indirect forms of export support".

The European Environmental Bureau (EEB) noted that "environmental NGOs have repeatedly defended the CAP budget, but on the condition that farmers will be required to significantly improve the way they farm. However, the reformed CAP 2014-2020 as proposed will not contribute to preserving Europe’s natural resources like soil, water and biodiversity, thereby fatally undermining Europe’s food security."

"In some cases the proposal is in fact going back on previous reforms," the EEB said, referring to the introduction of "the option for coupled supports for cereals (e.g. maize, which requires many chemical inputs)". It also criticised the reform for allowing "a reverse shift from the second to the first pillar" whereby direct payments are 100% financed by pillar 2 funding, which are meant to serve environmental policy objectives.

BirdLife Europe was also deeply disappointed with the CAP reform proposals. "Despite their repeated promises of a green reform which would see the CAP rewarding farmers who deliver public goods, what has been published mostly fails to live up to the promise," it said. Among the most problematic aspects of the proposal for the NGO are: "1. Reverse modulation: a large group of countries would have the ability to move money from Pillar 2 to Pillar 1. This goes against all previous reforms and moves money away from targeted and effective spending towards blunt income support. 2. Coupled support to many different products without clear Commission control on the reasons for the re-coupling. 3. Higher support rates in rural development for all measures apart from environmental ones."

The Eurogroup for Animals said the Commission had missed the opportunity to address the animal welfare problems caused by very intensive systems of agricultural production. "No basic payment is foreseen to be given to farmers to improve animal welfare and in fact animal welfare is no longer stated clearly as an objective of the Common Agriculture Policy as it was previously in 2003," said Véronique Schmit, from the Eurogroup for Animals. "The future CAP will also continue to subsidise the export of live cattle to third countries, with the associated problems caused by long distance transport. The European Commission has missed the opportunity of standing firm and leading the way in ending export refunds," she concluded

TheUN Special Rapporteur on the right to food, Olivier De Schutter, said that "there is still too much public money being ploughed into making EU agriculture internationally competitive – money which cannot be matched in the developing world" and marginalises small-scale farmers in developing countries.

"Green requirements should underpin every penny of the taxpayer’s money - not a meager 30%. CAP reform should also do more to cut the EU’s dependency on the burgeoning soya and maize imports which feed European livestock, and strain natural resources in the rest of the world," he added.

The European confederation of Development NGOs (Concord) further regretted that "there is no reference to a commitment phasing out export refunds and export subsidies, which still allows for the EU to export below full production costs, making farmers in the developing world lose out to unfair competition."

Mats Persson, from the UK eurosceptic think tank Open Europe was quoted by Bloomberg saying that "the reformist bloc is outgunned and outnumbered. About 21 countries, which is obviously a strong negotiating block, are basically in favour of the status quo." He further added that "whoever can get Germany on board wins the battle. Once you have the Franco-German bloc reaching a position, that tends to produce more or less the outcome for the EU as a whole."